Annual report and financial statements 2022
Octopus Future Generations VCT
plc
Annual report and financial statements
2022
Octopus Future Generations VCT plc (‘Future
Generations VCT’ or the ‘Company’) is backing businesses that
aim to address society’s biggest challenges, providing an
opportunity for investors to share in the growth of ambitious,
purpose-driven companies.
The Company today announces the final results
for the period from inception to 30 June 2022 as below.
Chair’s statement
I am pleased to present the first annual report and accounts for
Future Generations VCT for the period from inception to 30 June
2022.
Future Generations VCT‘s three investment themes have great
potential:
- large markets to address by tackling some of society’s biggest
challenges;
- demand for solutions to the planet’s challenges is growing and
becoming more urgent; and
- ability to attract talent as people increasingly want to work
for businesses that make a positive difference in the world.
I would firstly like to welcome shareholders to Future
Generations VCT, which aims to invest in companies that will tackle
some of society’s biggest challenges. The NAV per share at 30 June
2022 was 96.1p, and in the period, Future Generations VCT made
two investments. A further four completed since the period end.
More information on two of these businesses can be found in the
Portfolio Manager‘s Review.
In the period to 30 June 2022, we utilised £1.8
million of our cash resources, including £1.7 million in new
investments. The cash balance of £29.8 million at
30 June 2022 represents 95% of net assets at that date.
We look forward to deploying significant further capital into new
investment opportunities over the coming months, and we ultimately
intend the profile of Future Generations VCT to comprise 80% to 90%
in VCT qualifying investments and 10% to 20% in permitted non-VCT
qualifying investments or cash.
Fundraise On 31 January 2022,
we launched the initial offer to raise up to £20 million with an
over-allotment facility of up to £80 million, and I am pleased
to report that as of 30 June 2022, we have successfully raised
£32 million. The offer will close for new applications on 31
October 2022.
As investors will be aware, the intention is to
invest in businesses which meet one of three key themes, which we
believe demonstrate excellent investment prospects as well as
having the potential to transform the world we live in for the
better.
AGMThe first Annual General
Meeting (‘AGM’) will take place on Monday 12 December 2022 from
12.00pm and will be held at the offices of Octopus Investments
Limited (‘Octopus Investments’), at 33 Holborn, London
EC1N 2HT. Full details of the business to be conducted at the
AGM will be given in the Notice of Annual General Meeting.
Shareholders’ views are important, and the Board
encourages shareholders to vote on the resolutions within the
Notice of Annual General meeting published as part of the Annual
Report 2022 using the proxy form, or electronically at
www.investorcentre.co.uk/eproxy. The Board has
carefully considered the business to be approved at the AGM and
recommends shareholders to vote in favour of all the resolutions
being proposed, as the Board will be doing.
We always welcome questions from our
shareholders for either the Board or Octopus Investments
(‘Portfolio Manager’), so I am pleased we will be joined by Simon
King from the investment team on the day. Alternatively,
shareholders are invited to send any questions they may have via
email to
FGAGM@octopusinvestments.com.
Future Generations VCT financial summary
Net assets (£’000) |
31,292 |
Loss after tax (£’000) |
(313) |
Net asset value (‘NAV’) per share (p) |
96.1 |
Outlook
Future Generations VCT is at a very early stage
and, although only a handful of investments have been made so far,
the upcoming pipeline of portfolio companies is extremely exciting.
It spans a wide range of issues that, if successful, could
make a meaningful difference to the world that we live in, and
could create profitable investment opportunities for Future
Generations VCT.
Launching a new fund in 2022 does not come
without its complexities and challenges. With central banks
increasing interest rates, high inflation, the conflict in Ukraine
and the cost-of-living crisis, we are entering a very different
economic backdrop to that which has been experienced in recent
years, even when considering issues created by the pandemic. All
markets, including early-stage ventures, have been affected by
these changes and we expect this to continue in the near to medium
term. However, history has shown that great businesses can be
founded during some of the most challenging periods as often there
is more willing adoption of new technology and solutions. The
investment team at Octopus – which sources the investment
opportunities, completes the investments and coordinates the
portfolio management – is aware that portfolio companies will need
more support to navigate these challenging times and allow them to
take advantage of all opportunities available to them.
The team is well resourced and is very experienced in
early-stage investing.
Future Generations VCT was launched with the
intention of investing in companies with the power to transform the
world for the better. By focusing on our three investment themes,
we believe the businesses we are backing should achieve this
ambitious goal, as well as delivering great returns to
investors.
As this Company is at the beginning of its
journey, it will take time to deploy the funds raised into
companies the investment team consider to be good investment
opportunities. While the Company is building up its investments,
the portfolio will naturally be more concentrated in fewer
companies. This means that performance will be more sensitive to
the success and/or failure of these investments than if the
portfolio was larger.
As such, over the coming years, there may well
be a decline in overall value as Future Generations VCT invests in
new businesses, some of which are at the start of their growth
journey and need to build their technology, prove their market, win
new contracts and grow their teams. Their value will take time to
grow, and unfortunately some of these will ultimately fail.
The long-term target is to pay an annual
dividend of 5% of the NAV. However, given the expected holding
period of target portfolio companies and restrictions imposed on
VCTs, it is very unlikely Future Generations VCT will be able to
pay dividends before 1 July 2025. During this time, any growth in
value will increase the value of the Company. Dividends are likely
to be generated from successful exits, so the Company is unlikely
to pay significant dividends until portfolio companies have time to
mature and/or be acquired.
I would like to conclude by thanking both my
Board colleagues and the Octopus team on behalf of all shareholders
for their hard work. I am excited to see what the coming year
brings for this new Company.
Helen SinclairChair28 October
2022
Portfolio Manager’s review
At Octopus, our focus is on managing your
investments and providing investors with clear and transparent
communication. Our annual and interim updates are designed to keep
you informed about the progress of your investment. Octopus was
established in 2000 and has a strong commitment to
both smaller companies and to VCTs. We currently manage
five VCTs, including Future Generations VCT, with assets of over
£1.9 billion.
Focus on Future Generations VCT’s
performance
The NAV per share at 30 June 2022 was 96.1p and
in the period Future Generations VCT made two new investments.
Going forward, we will report on the proportion and value of the
portfolio in each sustainability theme. Of the two investments
which have completed at 30 June 2022, 61% address the revitalising
healthcare theme with a total value of £1.0 million and the
remaining 39% are aligned with the empowering people category, with
a total value of £0.7 million. There are investments in the
pipeline which are concentrating on building a sustainable planet
but have not yet completed.
As part of our responsible ownership strategy,
we require portfolio companies to put in place a
diversity and inclusion policy (‘D&I’) and an
anti‑harassment policy. We will also be engaging with each
company to help them understand their greenhouse gas emissions and
support them to take action to minimise them. We will report
on engagement to our shareholders on an annual basis. Of the
two investments made, both are in the process of implementing a
D&I policy and all have been offered complimentary access to a
carbon accounting and management tool to enable reporting around
key metrics and to feed into carbon reduction plans. We are pleased
that, to date, 100% of the portfolio companies are
signed up and utilising the carbon accounting tool.
Overview of investments
Future Generations VCT completed two new
investments in the reporting period, totalling £1.7 million, and
four further investments after 30 June 2022. Together, these
totalled £3.9 million invested into new companies. These companies
have also been invested in by other funds managed by Octopus.
We are expecting to make further investments
over the coming months, and below are some examples of potential
investments in the pipeline across Future Generations VCT’s three
sustainability themes:
A selection of our pipeline of new potential
investments
Building a sustainable planet:
- An embedded insurance platform that
gives merchants the ability to provide insurance
bundles to their customers. This promotes more
sustainable consumption via their services for repair and
reconditioning rather than the purchase of new
equipment.
Empowering people:
- A business that offers an
end-to-end federated learning platform enabling data scientists to
conduct analysis over sensitive data without compromising privacy
or data security.
- A company which has developed a
benefits platform to offer greater autonomy for employees to select
their own benefits.
Revitalising healthcare:
- A company which has created a
digital, personalised psychological therapy and coaching
platform.
- A business which has built an
antigen discovery platform to develop cancer vaccines.
Outlook
The world around us is changing at an
unprecedented rate. The Covid-19 pandemic and the economic
turbulence we have encountered in 2022 means that businesses need
to be even more agile and resilient. We launched the Future
Generations VCT in January 2022 and we believe, as history has
shown us, that great businesses are and will continue to be founded
at times of economic turmoil. We are constantly impressed at the
level of ingenuity, ambition, drive and passion that we see in the
entrepreneurs we meet who are looking to solve some of society’s
biggest issues. We believe the companies that understand what it
means to make the world a better place have the potential to
deliver some of the best returns to investors.
Future Generations VCT’s three themes address
some of the biggest challenges we have ever faced as a society and
planet. The team investing the Future Generations VCT was founded
in 2007, has backed over 175 teams, and a third of them have
founded their own companies previously. We review thousands of
potential businesses each year and typically select fewer than 1%
of these to invest in. The portfolio companies are supported
through their growth journey as we believe early-stage businesses
require more than just funding to be successful. They require
specialist knowledge to be able to take advantage of all
opportunities presented, especially in today’s more challenging and
competitive climate. Our dedicated, in-house portfolio talent
team offers support to help companies to scale their recruitment,
provides access to specialist advice and consultants, and runs
events and workshops.
We have already completed some of Future
Generations VCT’s first investments and these companies are
addressing a mixture of issues including career coaching,
microscopic camera technology, and autonomous telemedicine.
This diversity shows how wide-ranging Future Generation VCT’s
scope will be across its three investment themes and we believe the
entrepreneurs behind these businesses have created some
best-in-class solutions that we are delighted to help scale. As
well as backing companies across a diverse range of sectors, we
also want to back diverse management teams as we believe diversity
encourages innovation and is a crucial success factor.
As such, we have recently published our intention to make sure
30% of all new founder pitches will be by businesses led or co-led
by a woman by 2025, increasing to 50% by 2027. Alongside this, we
have also been signatories to HM Treasury’s Investing in Women Code
since 2020. We are excited to have the opportunity to invest this
new VCT, support its ambition to make the world a better
place for future generations, and to deliver attractive returns to
shareholders. We believe that Octopus is extremely well placed
to see some of the best investment opportunities, generated by
our extensive network and reputation in the early‑stage
market.
Who we’ve backed so far
Inflow |
|
www.getinflow.io |
|
Inflow is a digital health company that helps people with Attention
Deficit Hyperactivity Disorder (‘ADHD’). ADHD impacts hundreds of
millions of people worldwide and the company hopes to become the
home for people with ADHD before then applying its approach to a
broader set of neurological differences including Autism, Dyslexia,
Dyspraxia, Obsessive Compulsive Disorder (‘OCD’) and Tourette’s.
Product launch date: March
2021Investment date: June 2022 |
- Inflow has achieved over 200,000
downloads and has over 15,000 paying members.
- The company follows a self-pay,
direct-to-consumer model.
|
Post period end investment
Oto |
|
www.joinoto.com |
|
Oto is a digital health start-up that helps people with overlooked
chronic conditions get their life back. Its first product is a
digital programme that teaches people to manage tinnitus – a
condition commonly experienced as ringing in the ears. The
programme uses science-based therapy delivered via a mobile app to
enable tinnitus self-management at a fraction of the cost of
in‑person treatment. Product launch date:
January 2021Investment date: July 2022 |
- One in eight people are affected
by tinnitus, and there are 23 million British and American
people really struggling with it.
- Digital therapeutics solutions like
Oto are providing a 10x cheaper and more convenient way of managing
this condition.
|
Risk and risk management
The Board assesses the risks faced by Future
Generations VCT and, as a Board, reviews the mitigating controls
and actions and monitors effectiveness of these controls and
actions.
Principal risks, emerging
risks and
risk management
Detailed below are the principal risks of Future
Generations VCT, and the mitigating actions in relation to those
risks. In addition to the principal risks, emerging risks including
adverse changes in the global macroeconomic environment,
climate change, high market valuations and geopolitical
protectionism are monitored by the Board.
The Board seeks to mitigate risks by setting
policy, regularly reviewing performance and monitoring progress and
compliance. In the mitigation and management of these risks, the
Board applies the principles detailed in the Financial Reporting
Council’s Guidance on Risk Management, Internal Control and
Related Financial and Business Reporting.
Risk |
Mitigation |
Investment performance:The focus of Future
Generations VCT investments is into early-stage, unquoted, small
and medium‑sized VCT qualifying companies which, by their nature,
entail a higher level of risk and shorter cash runway than
investments in larger quoted companies. |
Octopus has significant experience and a strong track record of
investing in early-stage unquoted companies, and appropriate due
diligence is undertaken on every new investment. A member of
the Octopus Ventures team is typically appointed to the board of a
portfolio company, and regular board reports are prepared by the
portfolio company’s management and examined by the Manager. This
arrangement, in conjunction with its portfolio talent team’s active
involvement, allows Future Generations VCT to play a prominent role
in a portfolio company’s ongoing development and strategy. |
|
|
VCT qualifying status: |
|
Future Generations VCT is required at all times to observe the
conditions for the maintenance of approved VCT status. The
loss of such approval could lead to Future Generations VCT and its
investors losing access to the various tax benefits associated with
VCT status and investment. |
Octopus tracks Future Generations VCT’s qualifying status
throughout the period, and review this at key points including at
the point of investment and realisation. This status is reported to
the Board at each Board meeting. The Future Generations VCT Board
has also engaged external independent advisers to undertake an
independent VCT status monitoring role. |
|
|
Loss of key people: |
|
The loss of key investment staff by the Portfolio Manager could
lead to poor fund management and/or performance due to lack of
continuity or understanding of Future Generations VCT. |
The Portfolio Manager has a broad team experienced in and focused
on early-stage investing. This mitigates the risk of any one
individual with the required skill set and knowledge of Venture
Capital investing, and the portfolio specifically, leaving. Key
investment staff are also incentivised via the performance
incentive fee. |
|
|
Operational: |
|
The Future Generations VCT Board is reliant on the Portfolio
Manager to manage investments effectively, and manage the services
of a number of third parties, in particular the Registrar,
Depositary and tax advisers. A failure of the systems or controls
at Octopus or third-party providers could lead to an inability to
provide accurate reporting and accounting and to ensure adherence
to VCT rules. |
The Future Generations VCT Board reviews the system of internal
controls, both financial and non-financial, operated by Octopus (to
the extent the latter are relevant to Future Generations VCT
internal controls). These include controls designed to make sure
that Future Generations VCT assets are safeguarded and that proper
accounting records are maintained. |
|
|
Information security: |
|
A loss of key data could result in a data breach and fines.
The Future Generations VCT Board is reliant on Octopus and third
parties to take appropriate measures to prevent a loss of
confidential customer information. |
Annual due diligence is conducted on third parties which includes a
review of their controls for information security. Octopus has a
dedicated information security team and a third party is engaged to
provide continual protection in this area. A security framework is
in place to help prevent malicious events. |
|
|
Economic: |
|
Events such as an economic recession, movement in interest rates,
inflation and rising living costs could adversely affect some
smaller companies’ valuations, as they may be more vulnerable
to changes in trading conditions or the sectors in which they
operate. This could result in a reduction in the value of
Future Generations VCT assets. |
Future Generations VCT aims to invest in a diverse portfolio of
companies, across a range of sectors, which helps to mitigate
against the impact on any one sector. Future Generations VCT also
maintains adequate liquidity to make sure that it can continue to
provide follow‑on investment to those portfolio companies which
require it and which is supported by the individual investment
case. |
|
|
Legislative: |
|
A change to the VCT regulations could adversely impact Future
Generations VCT by restricting the companies Future Generations VCT
can invest in under its current strategy. Similarly, changes
to VCT tax reliefs for investors could make VCTs less
attractive and impact Future Generations VCT’s ability to
raise further funds. |
The Portfolio Manager engages with HM Treasury and industry bodies
to demonstrate the positive benefits of VCTs in terms of growing
early-stage companies, creating jobs and increasing tax revenue,
and to help shape any change to VCT legislation. The ‘sunset
clause’ meant that in 2025 the government would need to renew the
legislation to allow VCTs to continue to operate under the current
legislation. However, from the government’s recent announcement
they have stated they are supportive of VCTs and see the value in
extending them in the future. |
|
|
Liquidity: |
|
The risk that Future Generations VCT’s available cash will not be
sufficient to meet its financial obligations. Future Generations
VCT invests into smaller unquoted companies, which are inherently
illiquid as there is no readily available market for these shares.
Therefore, these may be difficultto realise for their fair market
value at short notice. |
Future Generations VCT’s liquidity risk is managed on a continuing
basis by Octopus in accordance with policies and procedures agreed
by the Board. Future Generations VCT’s overall liquidity risks are
monitored on a quarterly basis by the Board, with frequent
budgeting and close monitoring of available cash resources. Future
Generations VCT maintains sufficient investments in cash and
readily realisable securities to meet its financial
obligations. |
Viability statement
In accordance with the FRC UK Corporate
Governance Code published in 2018 and provision 36 of the AIC Code
of Corporate Governance, the Directors have assessed the prospects
of Future Generations VCT over a period of five years, consistent
with the expected investment holding period of an investor. A
fundraising was launched on 31 January 2022 and is due to close on
31 October 2022, raising over £40 million. Under VCT rules,
subscribing investors are required to hold their investment for a
five‑year period in order to benefit from the associated tax
reliefs. The Board regularly considers strategy, including investor
demand for Future Generations VCT’s shares, and a five-year period
is considered to be a reasonable time horizon for this.
The Board carried out a robust assessment of the
emerging and principal risks facing Future Generations VCT and its
current position. This includes the cost of living crisis, rising
interest rates, the war in Ukraine and any other risks which may
adversely impact its business model, future performance, solvency
or liquidity, and focused on the major factors which affect the
economic, regulatory and political environment.
Particular consideration was given to Future
Generations VCT’s reliance on, and close working relationship with,
the Portfolio Manager. The principal risks faced by Future
Generations VCT and the procedures in place to monitor and mitigate
them are set out above.
The Board has carried out robust stress testing
of cash flows, which included assessing the resilience of portfolio
companies, including the requirement for any future financial
support.
The Board has additionally considered the
ability of Future Generations VCT to comply with the ongoing
conditions to make sure it maintains its VCT qualifying status
under its current investment policy.
Based on this assessment the Board confirms that
it has a reasonable expectation that Future Generations VCT will be
able to continue in operation and meet its liabilities as they fall
due over the five-year period to 30 June 2027. The Board is
mindful of the ongoing risks and will continue to make sure that
appropriate safeguards are in place, in addition to monitoring the
cash flow forecasts to make sure Future Generations VCT has
sufficient liquidity.
Directors’ responsibilities statement
The Directors are responsible for preparing the
Strategic Report, the Directors’ Report, the Directors’
Remuneration Report and the Financial Statements in accordance with
applicable law and regulations. They are also responsible for
ensuring that the annual report and financial statements include
information required by the Listing Rules of the Financial Conduct
Authority.
Company law requires the Directors to prepare
financial statements for each financial year. Under that law the
Directors have elected to prepare the financial statements in
accordance with United Kingdom Generally Accepted Accounting
Practice (‘GAAP’), including Financial Reporting Standard 102 – The
Financial Reporting Standard Applicable in the United Kingdom and
Republic of Ireland (‘FRS 102’), United Kingdom accounting
standards and applicable law. Under company law the Directors must
not approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs and
profit or loss of the Company for that period. In preparing these
financial statements, the Directors are required to:
- select suitable accounting policies and then apply them
consistently;
- make judgements and accounting estimates that are reasonable
and prudent;
- state whether applicable UK accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements;
- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business; and
- prepare a Strategic Report, Directors’ Report and Directors’
Remuneration Report which comply with the requirements of the
Companies Act 2006.
The Directors are responsible for keeping
adequate accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable accuracy at
any time the financial position of the Company and enable them to
ensure that the financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
In so far as each of the Directors is aware:
- there is no relevant audit information of which the Company’s
auditor is unaware; and
- the Directors have taken all steps that they ought to have
taken to make themselves aware of any relevant audit information
and to establish that the auditor is aware of that
information.
The Directors are responsible for preparing the
annual report and financial statements in accordance with
applicable law and regulations. Having taken advice from the Audit
Committee, the Directors are of the opinion that this report as a
whole provides the necessary information to assess the Company’s
performance, business model and strategy and is fair, balanced and
understandable.
The Directors are responsible for the
maintenance and integrity of the corporate and financial
information included on the Company’s website. Legislation in the
United Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other
jurisdictions.
The Directors confirm that, to the best of their
knowledge:
- the financial statements, prepared
in accordance with United Kingdom Generally Accepted Accounting
Practice, including FRS 102, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Company; and
- the annual report and financial
statements (including the Strategic Report), give a fair review of
the development and performance of the business and the position of
the Company, together with a description of the principal risks and
uncertainties that it faces.
On behalf of the Board
Helen Sinclair Chair28 October 2022
Income statementPeriod ended 30 June 2022
|
|
Period to 30 June 2022 |
|
|
Revenue |
Capital |
Total |
|
|
£’000 |
£’000 |
£’000 |
Net gain on valuation of fixed asset investments |
|
— |
9 |
9 |
Investment management fee |
|
(39) |
(118) |
(157) |
Other expenses |
|
(165) |
— |
(165) |
Loss before tax |
|
(204) |
(109) |
(313) |
Tax |
|
— |
— |
— |
Loss after tax |
|
(204) |
(109) |
(313) |
Loss per share – basic and diluted |
|
(1.6)p |
(0.8)p |
(2.4)p |
- The ‘Total’ column of this statement is the profit and loss
account of Future Generations VCT; the supplementary revenue return
and capital return columns have been prepared under guidance
published by the Association of Investment Companies.
- All revenue and capital items in the above statement derive
from continuing operations.
- Future Generations VCT has only one class of business and
derives its income from investments made in shares and securities
and from bank and money market funds.
Future Generations VCT has no other comprehensive income for the
period.
Balance sheetPeriod ended 30 June 2022
|
|
As at 30 June 2022 |
|
|
£’000 |
£’000 |
Fixed asset investments |
|
|
1,663 |
Current assets: |
|
|
|
Debtors |
|
54 |
|
Applications cash1 |
|
1,915 |
|
Cash at bank |
|
29,826 |
|
|
|
|
31,795 |
Creditors: amounts falling due within one year |
|
(2,166) |
|
Net current assets |
|
|
29,629 |
|
|
|
|
Net assets |
|
|
31,292 |
|
|
|
|
Share capital |
|
|
33 |
Share premium |
|
|
31,572 |
Capital reserve realised |
|
|
(118) |
Capital reserve unrealised |
|
|
9 |
Revenue reserve |
|
|
(204) |
Total equity shareholders’ funds |
|
|
31,292 |
NAV per share |
7 |
|
96.1p |
- Cash received from investors but not yet allotted.
The statements were approved by the Directors and authorised for
issue on 28 October 2022 and are signed on their behalf by:
Helen Sinclair ChairCompany No: 13750143
Statement of changes in equityPeriod ended 30
June 2022
|
|
|
Capital |
Capital |
|
|
|
|
Share |
reserve |
reserve |
Revenue |
|
|
Share capital |
premium |
realised1 |
unrealised |
reserve1 |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
As at 17 November 2021 |
— |
— |
— |
— |
— |
— |
Comprehensive income for the
period: |
|
|
|
|
|
|
Management fees allocated as capital expenditure |
— |
— |
(118) |
— |
— |
(118) |
Net gain on fair value of fixed asset investments |
— |
— |
— |
9 |
— |
9 |
Loss after tax |
— |
— |
— |
— |
(204) |
(204) |
Total comprehensive loss for the period |
— |
— |
(118) |
9 |
(204) |
(313) |
Contributions by and distributions
to owners: |
|
|
|
|
|
|
Shares issued |
33 |
32,111 |
— |
— |
— |
32,144 |
Share issue costs |
— |
(539) |
— |
— |
— |
(539) |
Total contributions by and distributions to owners |
33 |
31,572 |
— |
— |
— |
31,605 |
Balance as at 30 June 2022 |
33 |
31,572 |
(118) |
9 |
(204) |
31,292 |
- Reserves are available for distribution, subject to
restrictions.
Cash flow statementPeriod ended 30 June
2022
|
|
Period to 30 June |
|
|
2022 |
|
|
£’000 |
Cash flows from operating activities |
|
|
Loss before tax |
|
(313) |
Increase in debtors |
|
(54) |
Increase in creditors |
|
251 |
Gain on valuation of fixed asset investments |
|
(9) |
Outflow from operating activities |
|
(125) |
Cash flows from investing activities |
|
|
Purchase of fixed asset investments |
|
(1,654) |
Outflow from investing activities |
|
(1,654) |
Cash flows from financing activities |
|
|
Applications account inflow |
|
32,144 |
Applications account outflow |
|
(30,229) |
Proceed from share issues |
|
32,144 |
Share issue costs |
|
(539) |
Inflow from financing activities |
|
33,520 |
Increase in cash and cash equivalents |
|
31,741 |
Opening cash and cash equivalents |
|
— |
Closing cash and cash equivalents |
|
31,741 |
Cash and cash equivalents comprise |
|
|
Cash at bank |
|
29,826 |
Applications cash |
|
1,915 |
Closing cash and cash equivalents |
|
31,741 |
Notes to the financial statements
1. Principal accounting policies
Octopus Future Generations VCT plc (‘Future
Generations VCT’) is a Public Limited Company (plc) incorporated in
England and Wales and its registered office is at 6th Floor, 33
Holborn, London EC1N 2HT.
Future Generations VCT has been approved as a
Venture Capital Trust by HMRC under Section 259 of the Income
Taxes Act 2007. The shares of Future Generations VCT were first
admitted to the Official List of the UK Listing Authority and
trading on the London Stock Exchange on 5 April 2022 and can be
found under the TIDM code OFG. Future Generations VCT is premium
listed.
The principal activity of Future Generations VCT
is to invest in a diversified portfolio of UK smaller companies in
order to generate capital growth over the long term as well as an
attractive tax-free dividend stream.
The financial statements are presented in
sterling (£) to the nearest £’000. The functional currency is also
sterling (£).
Basis of preparation
The financial statements have been prepared on a
going concern basis under the historical cost convention, except
for the measurement at fair value of certain financial instruments,
and in accordance with UK Generally Accepted Accounting Practice
(‘GAAP’), including Financial Reporting Standard 102 – ‘The
Financial Reporting Standard applicable in the United Kingdom and
Republic of Ireland’ (‘FRS 102’), Companies Act 2006 and the
Statement of Recommended Practice (SORP) ‘Financial Statements of
Investment Trust Companies and Venture Capital Trusts (July
2022)’.
2. Investment management
feesAccounting policyFor the purposes of
the revenue and capital columns in the Income Statement, the
management fee has been allocated 25% to revenue and 75% to
capital, in line with the Board’s expected long-term return in the
form of income and capital gains respectively from Future
Generations VCT’s investment portfolio.
Disclosure
|
Period to 30 June 2022 |
|
Revenue |
Capital |
Total |
|
£’000 |
£’000 |
£’000 |
Investment management fee |
39 |
118 |
157 |
Total |
39 |
118 |
157 |
The Portfolio Manager provides investment
management services through agreements with Octopus AIF Management
Limited and Future Generations VCT. It also provides accounting and
administration services to Future Generations VCT under a
Non-Investment Services Agreement (‘NISA’). No compensation is
payable if the agreement is terminated by either party, if the
required notice period is given. The fee payable, should
insufficient notice be given, will be equal to the fee that would
have been paid should continuous service be provided, or the
required notice period was given.
3. Other expensesAccounting
policyOther expenses are accounted for on an accruals
basis and are charged wholly to revenue.
The transaction costs incurred when purchasing or selling assets
are written off to the Income Statement in the period that they
occur.
|
Period to |
|
30 June 2022 |
|
£’000 |
Audit fees1 |
38 |
Directors’ remuneration2 |
29 |
NISA fees |
24 |
Listing fees |
17 |
Printing fees |
17 |
Depositary fees |
13 |
Registrar fees |
12 |
Other fees |
15 |
Total |
165 |
- Includes VAT.
- Includes employers’ NI.
Total ongoing charges are capped at 3.0% of net
assets. For the period to 30 June 2022 the ongoing charges were
2.2% of net assets. This is calculated by summing the annualised
expenses incurred in the period (excluding non-recurring expenses)
divided by the average NAV throughout the period.
4. Directors’ remunerationTotal
Directors’ fees paid during the period were £28,000. Employers’
National Insurance contributions paid during the period were
£1,000. The highest paid Director received £16,000. None of
the Directors received any other remuneration or benefit from
Future Generations VCT during the period. Future Generations VCT
has no employees other than Non-Executive Directors. The average
number of Non-Executive Directors in the period was three.
5. Tax on ordinary
activitiesAccounting policyCorporation
tax payable is applied to profits chargeable to corporation tax, if
any, at the current rate. The tax effect of different items of
income/gain and expenditure/loss is allocated between capital and
revenue return on the ‘marginal’ basis as recommended in the
SORP.
Deferred tax is recognised in respect of all
timing differences at the reporting date. Timing differences are
differences between taxable profits and total income as stated in
the financial statements that arise from the inclusion of income
and expenses in tax assessments in periods different from those in
which they are recognised in financial statements.
DisclosureThe corporation tax charge for the
period was £nil.
|
Period to |
|
30 June 2022 |
|
£’000 |
Loss on ordinary activities before tax |
(313) |
Current tax at 19% |
(60) |
Effects of: |
|
Non‑taxable income |
— |
Non‑taxable capital gains |
(2) |
Non‑deductible expenses |
— |
Excess management expenses on which deferred tax not
recognised |
81 |
Tax rate differences1 |
(19) |
Total current tax charge |
— |
- Tax rate difference due to tax charge for the period being
calculated at 19% and excess management expenses on which deferred
tax is not recognised being calculated at 25%.
Unrelieved tax losses of £313,000 are estimated
to be carried forward at 30 June 2022 (subject to completion of
Future Generations VCT’s tax return) and are available for
offset against future taxable income, subject to agreement with
HMRC. Future Generations VCT has not recognised the deferred tax
asset of £81,000 in respect of these tax losses because there
is insufficient forecast taxable income in excess of deductible
expenses to utilise these losses carried forward.
The deferred tax asset is based on the future
tax rate that has been substantially enacted as at the balance
sheet date.
Approved VCTs are exempt from tax on capital
gains. As the Directors intend for Future Generations VCT to
continue to maintain its approval as a VCT through its affairs, no
current deferred tax has been recognised in respect of any capital
gains or losses arising on the revaluation or disposal of
investment.
6. Earnings per share
|
Period to 30 June 2022 |
|
Revenue |
Capital |
Total |
|
£’000 |
£’000 |
£’000 |
Loss attributable to Ordinary shareholders (£’000) |
(204) |
(109) |
(313) |
Loss per Ordinary share (p) |
(1.6) |
(0.8) |
(2.4) |
The total earnings per share is based on
13,205,218 Ordinary shares, being the weighted average number of
Ordinary shares in issue during the period.
There are no potentially dilutive capital
instruments in issue and so no diluted return per share figures are
relevant. The basic and diluted earnings per share are
therefore identical.
7. Net asset value per share
|
30 June 2022 |
Net assets (£’000) |
31,292 |
Shares in issue |
32,569,178 |
NAV per share (p) |
96.1 |
8. Post balance sheet
events
The following events occurred between the
balance sheet date and the signing of these financial
statements:
- four new investments completed
totalling £2.3 million; and
- 4.6 million shares were allotted at
a price of 99.1p per share on 8 August 2022. This includes the
applications cash balance that had not yet been allotted at 30 June
2022.
- on 25 October 2022, the Company
announced the current Offer for Subscription to raise up to £20
million in aggregate with an over-allotment facility of £80 million
will close for new applications on 31 October 2022.
9. Transactions with
the Manager and Portfolio ManagerFuture Generations VCT is
classified as a full-scope Alternative Investment Fund under the
Alternative Investment Fund Management Directive (the ‘AIFM
Directive’). Future Generations VCT has appointed Octopus AIF
Management Limited to provide the services of an AIFM of a full
scope AIF. In accordance with its power to do so under AIFMD,
Octopus AIF Management Limited has delegated investment management
to Octopus Investments Limited, whilst retaining the obligations of
a risk manager.
Future Generations VCT paid Octopus AIF
Management Limited £157,000 in the period as a management fee. The
annual management charge (‘AMC’) is based on 2% of Future
Generations VCT’s NAV. The AMC is payable quarterly in advance
and calculated using the latest published NAV of Future Generations
VCT and the number of shares in issue at each quarter end. Once the
quarter has ended, an adjustment will be made if the NAV at the end
of the current quarter is calculated and which differs from the NAV
as at the end of the previous quarter.
Octopus also provides Non-Investment Services to
Future Generations VCT, payable quarterly in advance. The fee is
0.3% of Future Generations VCT’s NAV, calculated at quarterly
intervals. The NISA fee is calculated using the latest
published NAV of Future Generations VCT and the number of shares in
issue at each quarter end. As with the AMC, an adjustment will be
made once the quarter has ended if the NAV at the end of the
current quarter is calculated and which differs from the NAV as at
the end of the previous quarter. During the period £24,000 was paid
to Octopus for Non-Investment Services.
In addition, Octopus are entitled to
performance-related incentive fees, subject to Future Generations
VCT’s total return at year end exceeding the total return at the
previous year end when an incentive fee was paid or 97p if the
first incentive fee has not yet been paid (the ‘Excess’), equal to
20% of the Excess. No performance fee will be paid prior to the
financial year ending on 30 June 2025, dividends (paid or declared)
being equal to or greater than 10p per Ordinary share and the total
return exceeding 120p.
The cap relating to Future Generations VCT’s
total expense ratio, that is the regular, recurring costs of Future
Generations VCT expressed as a percentage of its NAV, above which
Octopus have agreed to pay, is 3.0%, and is
calculated in accordance with the AIC Guidelines.
10. Related party
transactions
Several members of the Octopus investment team
hold non-executive directorships as part of their monitoring roles
in Future Generations VCT’s portfolio companies, but they have no
controlling interests in those companies.
Emma Davies, a Non-Executive Director of Future
Generations VCT, is also co-CEO of Octopus Ventures and owns shares
in Octopus Capital Ltd. No dividends have been paid to the
Directors of Future Generations VCT.
|
Period to |
|
30 June 2022 |
|
£ |
Helen Sinclair |
— |
Joanna Santinon |
— |
Emma Davies |
— |
Total |
— |
11.
2022 financial
information
The figures and financial information for the
period ended 30 June 2022 are extracted from the Company’s annual
financial statements for the period and do not constitute statutory
accounts. The Auditors’ report on the 2022 annual financial
statements was unqualified, did not include a reference to any
matter to which the auditors drew attention without qualifying the
report, and did not contain any statements under Sections 498(2) or
498(3) of the Companies Act 2006.
12. Annual Report and financial statements
The Annual Report and financial statements will
be available on the Company’s website
www.octopusinvestments.com/our-products/venture-capital-trusts/octopus-future-generations-vct
and the National Storage Mechanism which is located at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism. The Notice
of Annual General Meeting is contained within the Annual
Report.
13. General information Registered in England
& Wales. Company No. 13750143LEI: 213800AL71Z7N2O58N66
14. Directors Helen Sinclair (Chair), Joanna
Santinon and Emma Davies.
15. Secretary and registered office Octopus
Company Secretarial Services Limited33 Holborn, London EC1N 2HT
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